M/s. Ngenox Technologies Pvt. Ltd., Gurgaon V. ACIT, New Delhi

ITA 5168/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3631 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: UC DUBEY
• Assessee Lawyers: RAJESH ARORA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER ITA NO.-5168/DEL/2013 ( ASSESSMENT YEAR: 2010-11) NGENOX TECHNOLOGIES PVT. LTD. VIPUL TECH SQUARE-1, GOLF COURSE ROAD, SECTOR-43, GURGAON. AABCV971OE VS ACIT CENTRAL CIRCLE 2 NEW DELHI. ASSESSEE BY SH. RAJESH ARORA, CA REVENUE BY SH. U.C. DUBEY, SR. DR ORDER PER SHRI K.N. CHARY, J.M. AGGRIEVED BY THE ORDER DATED 12.07.2013 IN APPEAL NO. 82/12-13/CIT(A)-III RELEVANT TO THE ASSESSMENT YEAR 2010-11 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-III, NEW DELHI (HEREINAFTER FOR SHORT REFERRED TO AS THE LD . CIT(A)), ASSESSEE PREFERRED THIS APPEAL ON THE FOLLOWING GRO UNDS: 1. THE LD. CIT (A) HAS ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 51,00,000/- MADE BY THE AO BY R EJECTING THE CLAIM OF EXPENSES INCURRED FOR THE BUSINESS, WHICH IS ARBITRARY, BASELESS, UNJUSTIFIED AND BAD IN LAW. DATE OF HEARING 06.11.2017 DATE OF PRONOUNCEMENT 16.11.2017 2 ITA NO. 5168/DEL/2013 2. THE ASSESSEE CRAVES TO LEAVE THE RIGHT TO ADD, AMEN D OR MODIFY THE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED CON NECTIVITY, MANAGEMENT AND CONTROL OF BUILDINGS, INTEGRATED FAC ILITIES AND PUBLIC INFRASTRUCTURE LEADING TO REMOTE FACILITY MA NAGEMENT. COPY OF PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND AUDIT REPORT U/S 44AB OF THE ACT, FOR THE YEAR UNDER CONSIDERATION, WAS SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. FOR THE AY 2010-11 THEY HAVE FILED THEIR RETURN OF INCO ME ON 15.10.2010 DECLARING A TOTAL LOSS OF RS. 2,11,32,93 3/-. DURING THE SCRUTINY AO FOUND THAT AS COMPARED TO THE EARLIER A SSESSMENT ORDER THERE WAS A HUGE INCREASE IN THE PROPORTIONAT E COST OF PROJECT MATERIAL. HE CALLED UPON THE ASSESSEE TO E XPLAIN WHY THERE IS HUGE DIFFERENCE IN THE COST OF MATERIAL AT 40.64 % IN THE EARLIER, WHEREAS IT HAPPENS TO BE AT 49.73% FOR THE CURRENT YEAR. NOT BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSE E THAT IT IS NOT AN ABNORMAL THING IN HI-TECH BUSINESS, AO VERIFIED THE DETAILS OF COST OF MATERIAL AND FOUND THAT THE ASSESSEE HAD DE BITED A SUM OF RS. 51,00,000/- IN ITS PROJECTS-IMPORT LEDGER ACCOU NT. AO 3 ITA NO. 5168/DEL/2013 RECORDED A FINDING THAT THE ASSESSEE DID NOT RESPON D TO THE CLARIFICATION SOUGHT BY WAY OF ORDER SHEET ENTRY DA TED 24.12.2012, AS SUCH, AO DISALLOWED THE EXPENSES TO A TUNE OF RS . 51 LAKHS AND ADDED THE SAME BACK TO THE INCOME OF THE ASSESSEE. 3. IN APPEAL LD. COMMISSIONER SOUGHT THE VERY SAME INFORMATION FROM THE ASSESSEE. IT SEEMS BEFORE THE LD. CIT (A) ASSESSEE PRODUCED THE LEDGER ACCOUNT BOOKS IN RESPE CT OF RS. 20,49,100/- RELATING TO THE INVOICES ISSUED BY TWO PARTIES NAMELY TRIDONIC ATCO AND NESMA TRADING COMPANY RESPECTIVEL Y. ON VERIFICATION OF THESE AMOUNTS OF EXPENDITURE NAMELY RS.6,43,867/- UNDER INVOICE DATED 16.03.2010, RS. 7,56,214/- UNDE R INVOICE DATED 30.01.2011 ISSUED BY TRIDONIC ATCO AND RS. 6, 49,019/- INVOICE DATED 30.01.2011 ISSUED BY NESMA TRADING CO MPANY, LD. CIT (A) RECORDED THAT THE ASSESSEES NAME IS NOT TO BE FOUND ON THE INVOICE DATED 16.03.2010, WHEREAS UNDER INVOICE DAT ED 30.01.2011 ISSUED BY TRIDONIC ATCO AND NESMA TRADIN G COMPANY THE GOODS WERE DELIVERED ONE AND HALF YEAR AND ONE YEAR RESPECTIVELY EARLIER TO THE ISSUANCE OF THE INVOICE , AS SUCH, LD. CIT (A) THOUGHT THAT IT IS QUITE UNLIKELY, AS SUCH, THE Y CANNOT BE 4 ITA NO. 5168/DEL/2013 BELIEVED. ON THIS SCORE, HE REJECTED THE EXPENSES TO A TUNE OF RS.20,49,100/- COVERED BY THE INVOICES REFERRED TO ABOVE. IN RESPECT OF THE BALANCE AMOUNT OF RS. 30,50,900/- TH E LD. CIT (A) STATED THAT IN SPITE OF NUMBER OF DEMANDS THE ASSES SEE FAILED TO FURNISH THE DETAILS IN RESPECT OF THE EXPENDITURE C OVERED BY THIS AMOUNT, AS SUCH, THE SAME HAS TO BE DISALLOWED. AS A NET RESULT OF THE ABOVE DISCUSSION, LD. CIT (A) UPHELD THE DIS ALLOWANCE TO THE TUNE OF RS. 51 LAKHS AND DISMISSED THE APPEAL. HE NCE, THE ASSESSEE IS BEFORE US IN THIS APPEAL. 4. IT IS THE SUBMISSION OF THE LD. AR THAT THE PROJ ECT UNDER THE NAME AND STYLE M/S SAUDI INTERNATIONAL PETROCHEMICA L COMPANY (SIPCHEM) WAS STARTED IN THE AY 2008-09 AND WAS COM PLETED IN THE AY 2010-11. THE ASSESSEE RECOGNIZED AN INCOME OF RS. 3,00,61,376/- FOR THE YEAR ENDING WITH 31.03.2010 A ND ALL THE EXPENSES INCURRED AGAINST THE SAID PROJECT WERE ALS O BOOKED IN THE SAME YEAR. IN THAT PROCESS AN EXPENDITURE OF RS. 1 ,64,30,323/- UNDER THE HEAD COST OF MATERIAL, INCLUDING AN AMO UNT OF RS. 51 LAKHS RELEVANT FOR THIS APPEAL AND SUCH, RS. 51 LAK HS WAS PROVIDED AS EXPENDITURE BEING PAYABLE FOR THE YEAR UNDER CON SIDERATION. 5 ITA NO. 5168/DEL/2013 ACCORDING TO THE ASSESSEE, SINCE THE PROJECT WORK I S SPREAD IN SO MANY COUNTRIES THERE IS A LONG GAP BETWEEN THE SERV ICES PROVIDED AND THE BILLS OF EXPENSES RECEIVED. FURTHER THE IN COME WAS BOOKED INSTANTLY ON THE BASIS OF NEGOTIATION AS SOON AS AC KNOWLEDGE BY THE CLIENT. THIS RESULTED IN BOOKING THE REVENUE I N FULL, BUT THE CORRESPONDING AMOUNT OF EXPENSES WERE ALSO BOOKED I N COMPLIANCE WITH THE MATCHING CONCEPT. ACCORDING TO THE LD. AR HAVING MADE THE PROVISION FOR THE EXPENSES TO A TUN E OF RS. 51 LAKHS, AT THE END OF THE YEAR THE NEGOTIATIONS WERE KEPT GOING ON AND FINALLY THE EXPENSES ONLY TO THE TUNE OF RS. 20 ,41,000/- WERE MATERIALIZED. IN THESE CIRCUMSTANCES, THE ASSESSEE CONSIDERED THE BALANCE PROVISION AMOUNT OF RS. 30,50,900/- AS NO L ONGER NECESSARY AND WRITTEN OFF THE LIABILITY TO THE TUNE OF RS.30,50,900/- IN THE NEXT YEAR AND PAID THE TAXES THEREON. HOWEVER, WITHOUT APPRECIATING THESE FACTS LD. CIT ( A) DISMISSED THE APPEAL STATING THAT NO DETAILS FOR RS. 30,50,90 0/- WERE FURNISHED, AS SUCH, SUCH EXPENSES ARE LIABLE TO THE DISALLOWED AND IN SO FAR AS THE BALANCE AMOUNT OF RS. 20,40,900/-, THE INVOICES WERE NOT FOUND TO BE SATISFACTORY, AS SUCH, THAT AM OUNT IS ALSO LIABLE TO BE DISALLOWED. 6 ITA NO. 5168/DEL/2013 5. LD. DR ARGUED THAT THERE IS AN ATTEMPT TO OVER W RITE THE INVOICES AS IS EVIDENT FROM THE INVOICE DATED 30.01 .2011 SAID TO HAVE BEEN ISSUED BY NESMA TRADING COMPANY AND THE A UTHORITIES BELOW ARE QUITE JUSTIFIED IN DISALLOWING THE EXPENS ES FOR WANT OF PROOF. FURTHER ACCORDING TO THE LD. DR WHEN THE AS SESSEE RECEIVED GOODS LONG PRIOR TO THE END OF THE RELEVANT ASSESSM ENT YEAR, THERE WAS NO REASON AS TO WHY THERE IS A PROVISION FOR RS . 51 LAKHS, WHERE THE GOODS WERE RECEIVED IN RESPECT OF ONLY RS . 20,49,100/-. ACCORDING TO THE LD. DR THE PROFIT IS SHIFTED UNDUL Y FROM THE AY 2010-11 TO THE SUBSEQUENT YEAR BY DUBIOUS METHODS. HE FURTHER SUBMITS THAT WHEN THE LD. AR SUBMITS THAT IN THIS D IGITAL AGE THE TRANSACTIONS ARE DONE IN E-FORM, AS SUCH, BILLS ETC . NEED NOT BE LOOKED INTO, THERE IS NO REASON FOR THE DELAY IN TH E ASSESSEE SECURING THE INVOICES. WHEN THE GOODS WERE RECEIVE D IN THE EARLIER FINANCIAL YEARS THE ASSESSEE SHOULD HAVE MADE THE P ROVISION IN THOSE YEARS ONLY. 6. AS COULD BE SEEN FROM THE ASSESSMENT ORDER BY PA RAGRAPH NO. 4, AO RECORDED THAT IN RESPECT OF THE DEBIT ENT RY RELATING TO RS.51 LAKHS IN THE PROJECT IMPORT LEDGER ACCOUNT OF THE ASSESSEE, 7 ITA NO. 5168/DEL/2013 THE ASSESSEE WAS CALLED UPON TO CLARIFY THE SAME WI TH REASONS FOR CLAIMING THE PROVISION OF EXPENSES VIDE ORDER-SHEET ENTRY DATED 24.12.2012 BUT NO PROPER REPLY WAS GIVEN. LD. CIT (A) ALSO VIDE PARAGRAPH NO. 4.2 OF HIS ORDER RECORDED THAT DURING THE APPELLATE PROCEEDINGS THE ASSESSEE WAS CALLED UPON TO FURNISH THE INFORMATION RELATING TO THE DETAILS OF THE EXPENSES OF RS. 51 LAKHS ALONG WITH NECESSARY VOUCHERS, BILLS AND JUSTIFICA TION AS TO HOW THEY WERE TOWARDS BUSINESS EXPENSES AND THE NATURE OF EXPENSES FOR WHICH THE PROVISION WAS CREATED IN THE YEAR UND ER CONSIDERATION. LD. CIT (A) FURTHER RECORDED A FIND ING THAT THE ASSESSEE PRODUCED THREE INVOICES NAMELY TWO INVOICE S ISSUED BY ONE TRIDONIC ATCO AND ONE BY NESMA TRADING COMPANY, WHEREAS NO DETAILS IN RESPECT OF THE EXPENSE OF RS. 30,50,9 00/- WAS EVER PRODUCED. THERE IS NO DISPUTE IN RESPECT OF THE OB SERVATIONS OF THE LD. CIT (A) THAT THE DELIVERY OF GOODS UNDER THE VO UCHERS SUBMITTED BY THE ASSESSEE TOOK PLACE MORE THAN ONE YEAR PRIOR TO THE DATE OF INVOICES. IN SUCH AN EVENT, WE DO NOT FIND ANY REASONABLE EXPLANATION FROM THE ASSESSEE AS TO WHY THE PROVISION IS CREATED FOR THE AMOUNTS MORE THAN TWICE THE EXPE NDITURE THAT WAS INCURRED TOWARDS PURCHASE OF GOODS. 8 ITA NO. 5168/DEL/2013 7. FURTHER EVEN BEFORE US THE ASSESSEE DID NOT PROD UCE ANY MATERIAL TO CO-RELATE THE COMMERCIAL INVOICE NO. 92 335948 DATED 16.03.2010 WITH THE ASSESSEE, EXCEPT THE PAYMENT SC HEDULE. SO ALSO IN RESPECT OF THE OTHER TWO INVOICES, THE SUSP ICION ENTERTAINED BY THE LD. CIT (A) DOES NOT SEEM TO BE BASELESS. W HEN THE ASSESSEE IS TAKING SHELTER OF THE DIGITAL AGE FOR N OT PRODUCING THE INVOICES IN ORIGINAL, DELIVERY NOTES, PROJECT ORDER , SHIPMENT NOTE, DELIVERY NOTE OR ANY OTHER CORRESPONDENCE EVIDENCIN G THE PLACING OF ORDER AND RECEIVING THE SAME IN THE YEAR UNDER C ONSIDERATION, WE ARE OF THE OPINION THAT FOR THE SAME REASON THE ASSESSEE SHOULD NOT HAVE PLEADED ANY DELAY IN RECEIVING THE INVOICE S. WHEN THE GOODS WERE DELIVERED EVEN ACCORDING TO THE ASSESSEE MORE THAN A YEAR PRIOR TO THE DATES OF INVOICES, NOTHING PREVEN TED THE ASSESSEE FROM SECURING THE RELEVANT DOCUMENTS IN DIGITAL FOR M WITHOUT ANY DELAY. THE DEFENSE TAKEN BY THE ASSESSEE FOR NOT P RODUCING THE DOCUMENTS SOUGHT FOR BY THE AUTHORITIES BELOW DOES NOT FIT IN THE EXPLANATION OFFERED BY THEM, OR TO EXPLAIN THE RECE IPT OF INVOICES MORE THAN ONE YEAR OR ONE AND HALF YEAR AFTER THE D ELIVERY OF GOODS. THE GOODS MUST HAVE BEEN ENTERED IN THE INV ENTORY AND IN DIFFERENT REGISTERS AT DIFFERENT PLACES MAY BE IN P HYSICAL OR DIGITAL 9 ITA NO. 5168/DEL/2013 FORM. BUT THE ASSESSEE IS UNABLE TO PRODUCE THE RE QUIRED DOCUMENTS AND THEIR COMMUNICATION IN ANY FORM. IN THE CIRCUMSTANCES, WE FIND IT DIFFICULT TO BRUSH ASIDE THE OBSERVATIONS OF THE LD. CIT (A) THAT THE NON FURNISHING OF THE P RIMARY DETAILS AT ANY STAGE OF PROCEEDINGS AND THE INFIRMITIES IN THE DOCUMENTS THAT WERE PRODUCED AT THE APPELLATE STAGE, CREATED A REA SONABLE DOUBT AS TO THE AUTHENTICITY OF THE PROVISION AND THE EXP ENDITURE. WE DO NOT FIND ANYTHING UNUSUAL IN THE LD. CIT (A) ENTERT AINING A DOUBT THAT IT IS VERY UNLIKELY THAT A FOREIGN SUPPLIER WA ITS FOR A YEAR OR SO FOR ISSUING THE INVOICES AND RECEIVING THE PAYMENTS AFTER DELIVERY OF GOODS. CERTAINLY THIS UNUSUAL COMMERCIAL TRANSA CTION REQUIRES THE PROOF IN THE FORM OF THE TERMS AND CONDITIONS, CORRESPONDENCE AND OTHER EVIDENCE LIKE DELIVERY NOTE, SHIPMENT NOT E, ETC. ASSESSEE FAILED TO PLEAD BEFORE US ANY REASONS FOR THEIR INABILITY IN SECURING SUCH EVIDENCE AT LEAST BY NOW IN SUPPORT O F THEIR CONTENTIONS. ALL THESE FACTS PUT TOGETHER, DO NOT INSPIRE ANY CONFIDENCE IN OUR MIND TO BELIEVE THAT WHEN THE GOO DS WERE DELIVERED FOR A SUM OF RS. 20,49,100/-, THE ASSESSE E DOES NOT KNOW THE PROBABLE VALUE THEREOF AND WENT ON TO CREA TE THE PROVISION FOR A SUM OF RS. 51 LAKHS, COULD NOT SECU RE THE PRIMARY 10 ITA NO. 5168/DEL/2013 EVIDENCE EVEN IN RESPECT OF THE EXPENDITURE THAT WA S BOOKED, AND UNABLE TO EXPLAIN WHY THE BALANCE PROVISION FOR RS. 30,50,900/- HAD TO BE CREATED. ALL THESE THINGS SHOW THAT AT T HE END OF THE RELEVANT FINANCIAL YEAR THE ASSESSEE DID NOT HAVE E VEN THE FAINTEST IDEA AS TO THE PROBABLE EXPENDITURE THAT MAY HAVE T O BE PAID FOR WHICH THE PROVISION HAS TO BE CREATED. WE, THEREFO RE, FIND THAT THE PLEA TAKEN BY THE ASSESSEE DOES NOT SEEM TO BE BELI EVABLE EX FACIE, AS SUCH. WITH THIS VIEW OF THE THINGS, WE DO NOT PR OPOSE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) WHIL E DISMISSING THE APPEAL. WE, THEREFORE, FIND THE APPEAL DEVOID OF MERITS AND ACCORDINGLY, THE SAME IS LIABLE TO BE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.11.2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA C HARY) PRESIDENT JUDICIAL ME MBER DATED: 16.11.2017 *KAVITA ARORA 11 ITA NO. 5168/DEL/2013 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI